Charities – Effective Giving

It is that time of year when HMRC sends us our tax code for the year and the Society’s accounts have been audited, a connection? Yes. As a charity the Society can benefit from HMRC’s ‘Gift Aid Scheme’. This scheme allows charities to reclaim tax already paid on every donated (including subscriptions) pound received. Thus an income tax payer can make a declaration in favour of the charity (ies) to which their donations are made, so that the charity can reclaim income tax directly from HMRC. This is a very effective way of assisting charitable organisations.

What proportion of the donated money is spent on charitable deeds as against administration? Each year charities submit their accounts to the Charity Commission giving details showing how they spent their money. From these returns the costs of fund raising and administration can be calculated. There are wide variations but on average 80% is spent on charitable work, though sadly in one case only 52%.

The cost of fund raising was brought home to me the last time I acted as an executor for a sizable estate, all of which had been left to a variety of charities. Shortly after gaining probate I received a telephone call from a representative of a national charity, “When can we expect our money?” “How did you know?” I asked. “An agent researches probated estates and told us.” was the reply. Towards the end of the following March, another telephone call was received. “The money, how soon? I need it to make my bonus for the year.” The caller worked from an office not in a low cost part of the country but overlooking the Thames, with the associated high overhead costs.

Fortunately the deceased had apportioned half the estate to local charities and here was cost effectiveness in operation – no paid staffs and their pensions and diligent oversight of spending.

According to the Charities Aid Foundation we in Britain give 0.73% of our total wealth to charity, the French give 0.14%, whilst USA citizens give 1.67% of their earnings. By the way, people who gave money to able-bodied beggars in 1350 were breaking the law.

So in conclusion as you tackle your tax returns and consider making charitable donations, think about a ‘Gift Aid Scheme’ and think about local organisations.